Economics Unit 4

Question 1

4 macro objectives?

Answer 1

Eco growth - 2.5%/long run trend growth
Full employment
Inflation 2% => price stability
Stable bop on current account

Question 2

Eco growth aim?

Developing countries?

Answer 2

Sustainable eco growth for LR
Emerging markets/developing economies - increase eco development before eco growth = improve living stands/life expct/literacy rates

Question 3

Minimising unemployment?

How do govs account for certain types of unemployment?

Answer 3

Govs aim for as near to full employment as possb

Account for frictional unemployment y by aiming for unempl rate of around 3%
Labour force should also be employed in productive work

Question 4

Inflation? Aim?

Answer 4

Gov UK inflation target = 2% [measured w CPI]

Provide price stability for firms + consumers

Question 5

Stable b of payments on current account aim? (2)

Answer 5

Satisfactory current account so there’s not a large deficit

Near equ = country can sustainably finance current account = imp for LR growth

Question 6

Other macro objs? (2)

Answer 6

Balanced gov budget

Greater income equality

Question 7

Balanced gov budget aim?

Answer 7

Ensure gov keeps control of state borrowing so nat debt doesn’t escalate = allows gov to borrow cheaply in future if there’s need [makes repayment easier]

Question 8

Income equality?

Answer 8

Equitable distribution of income/wealth so theres not extreme gap betw rich & poor = fairer society

Question 9

Prioritisation of gov objs?

Answer 9

Importance of each obj changes overtime

Question 10

Eco growth vs inflation - potential conflicts/trade off?

Answer 10

Growing economy = likely to experience inflationary pressure on avg price level = esp true w positive output gap & AD increasing faster than AS