government macro objectives

Question 1

who are macro objectives set by?

Answer 1

they are goals set by the government aimed at improving the overall economic performance of a country as well as the quality of life of its citizen

Question 2

what are the macro objectives ?

Answer 2

Equity in the distribution of income
economic growth
environmental protection
minimising unemployment
balancing the gov budget
stable balance payments on the current

Question 3

how does the government aim to achieve these objectives?

Answer 3

the macro objectives ;
fiscal policy
monetary policy
supply side policy
exchange rate policy

Question 4

what is economic growth?

Answer 4

an increase in national output measured by gdp

Target rate of uk is 2%

Question 5

what are the positive impacts of economic growth ?

Answer 5

confidence
consumption
investment
lower unemployment
high incomes
living standards
better government budgets

Question 6

what a does an increase in real gdp mean for the economy and employment?

Answer 6

An increase in real GDP is a sign that the economy is expanding and employment is increasing

Question 7

what does recession mean?

Answer 7

2 consecutive quarters of negative economic growth

Question 8

what’s the uk target inflation rate ?

Answer 8

inflation - a sustained increase in the average price level of goods / services in an economy

The UK has a target inflation rate of 2% using the Consumer Price Index (CPI)

Question 9

what is consumer price index ?

Answer 9

A consumer price index is a price index, the price of a weighted average market basket of consumer goods and services purchased by households.

Question 10

why is low late of inflation desirable ?

Answer 10

its a symptom of economic growth

Question 11

what are the different causes of inflation?

Answer 11

cost push
demand pull

Question 12

what policy would the gov respond with for cost push

Answer 12

supply side policies- aim to improve quantity and quality of the factors of production

Question 13

what policy would the gov respond with for demand pull?

Answer 13

demand side policies - aim to improve AD in an economy

Question 14

what is the target rate for unemployment in the uk ?

Answer 14

4 - 5 %

This is close to the full employment level of labour (YFE)
There will always be a level of frictional unemployment
This makes it impossible to achieve 100% employment

Question 15

what is frictional unemployment ?

Answer 15

occurs when workers are transitioning between jobs

Question 16

what is low levels pop unemployment signs of ?

Answer 16

Low levels of unemployment are a sign of a strongly performing economy and are inversely linked to real GDP growth
When real GDP increases, unemployment falls
When real GDP decreases, unemployment rises

Question 17

what is the balance of payments for a country?

Answer 17

for a country is a record of all the financial transactions that occur between it and the rest of the world

Question 18

what current account focus on?

Answer 18

Focuses mainly on the financial transactions related to exports and imports of goods and services

Question 19

what does it mean when exports are greater than imports ?

Answer 19

If exports > imports, it will create a current account surplus

Question 20

what happens when imports are greater than exports?

Answer 20

If imports > exports, it will create a current account deficit

Question 21

what does the government budget show?

Answer 21

The Government Budget is presented annually and includes the forecasted revenue and expenditure

Question 22

what does it mean when expenditure its greater than revenue?

Answer 22

If expenditure > revenue, there is a budget deficit

Question 23

what are deficits financed through?

Answer 23

Any deficit has to be financed through public-sector borrowing
Any borrowing is added to the public sector debt(Government debt

Question 23

what happens if uk governments debt becomes too high?

Answer 23

then lenders begin to lose confidence in the Government’s ability to repay the debt
The Government then has to raise the interest rate it offers to lenders, which makes borrowing more expensive

Question 24

what does reducing the deficit mean?

Answer 24

Reducing the deficit can mean tough choices for the economy
E.g. Cutting public sector pay; raising taxes; reducing unemployment benefits; reducing spending on merit goods

Question 25

what does the gov aims to ensure(environmental protection)?

Answer 25

ensure sustainable economic development and reduce adverse impacts on the environment

Question 26

what are broader environmental aims ?

Answer 26

A focus on sustainability
The reduction of negative externalities of production
100% energy from renewable sources by 2035

Question 27

what does equitable distribution ensure ?

Answer 27

ensures fairness and allows the same opportunities for everyone
The aim is not equality of distribution as it removes the incentive to work and study

Question 28

what does high levels of income inequality cause ?

Answer 28

can create social unrest

Question 29

how is income inequality measured ?

Answer 29

using Gini coefficient

0 = complete equality
1 = complete inequality

Most developed country have a gini target of 0.3 - 0.4

Question 30

why is there a need for uk government to intervene ?

Answer 30

o intervene to maintain acceptable levels of income inequality.

Question 31

how can governments redistribute income?

Answer 31

Governments can redistribute income
Through a progressive tax system