Macro objectives

Question 1

GOVT goals for Growth

Answer 1

Strong , sustained and sustainable ( wants it to last a long time to secure future generations use of goods )

Question 2

GOVT goals for unemployment

Answer 2

They want low unemployment / full employment ( as many people in jobs as they can handle )

Question 3

GOVT inflation goal

Answer 3

Low and stable ( E.g 2% )

Question 4

GOVT trade goals

Answer 4

They want a balance between imports and exports

Question 5

Explain the conflict between Inflation and unemployment

Answer 5

Low unemployment = full capacity = fewer spare workers so demand for workers increase , leading to increased wage costs which are passed onto consumers via higher prices

Low unemployment = more confidence to spend more money in long term . Causes prices to rise caused by demand pull inflation

Question 6

Explain the conflict between economic growth and environmental protection

Answer 6

New factories increases production strain on water and air pollution and increases wastage rates

Growth = use of natural resources which are harmful if they are not renewable ( sustainability )

Ecosystems destroyed or damaged by building of new factories / homes etc ( extinction ? )

Question 7

Explain the conflict between growth and inflation

Answer 7

A rapid growing economy can cause large increases in prices due to increased demand , causing undesirable inflation rates

Attempts to keep inflation low can restrict growth ( e.g high I rates can discourage spending / encourage spending )

Question 8

Explain the conflict between inflation and the equilibrium in the balance of payments

Answer 8

If inflation is low , it implies that prices are slowly rising . If they rise slower than in other nations then exports to other nations will increase and imports will decrease ( surplus ) ( reduce the deficit )

Low inflation managed by high I rates . High I rates encourage foreign investment = increased demand for domestic currency ( increasing its value ) . Making exports more expensive and imports cheaper . Reducing the surplus but making the deficit worse too

Question 9

Explain the conflict between Economic growth and a reduction in wealth inequality

Answer 9

As the economy grows , demand for highly skilled workers increase and low skilled workers fall ( due to machine usage more )

GOVT can chose to use extra tax rev gained to increase welfare payments / increase minimum wage or progressive taxes to decrease inequality

However this can damage future economic growth

Supply side policies will encourage work and reduce immobility of labour while reducing unemployment