Macroeconomic Objectives Flashcards
What are the main macroeconomic objectives?
The aims or goals of government policy include:
* Economic growth (% change in real GDP)
* Price stability
* High employment rate and low unemployment
* Sustainable overseas trade balance
* Improved national well-being
What does price stability refer to?
Control of cost and price inflation, often via an inflation target
List other macroeconomic objectives.
- Environmental protection
- Improved productivity
- Improved international competitiveness
- Good economic environment for investment
- Improved public services
- Sustainable government finances
- More equitable distribution of income and wealth
- Target for reducing poverty
What can cause the objectives of government economic policy to change?
Changes in the economic and political context
In a cost-of-living crisis, which macroeconomic objective may become more important?
Achieving price stability may become more important than growth
What is a potential trade-off of faster economic growth?
It can fuel demand-pull inflation and widen a deficit on the current account
Fill in the blank: Low unemployment can increase real wages and cause _______.
cost-push inflation
What may happen if policies to reduce inflation are implemented?
They can slow growth and cause unemployment
Reducing government borrowing and the national debt can lead to what economic outcome?
It can slow growth and cause living standards to stagnate
How does climate change influence government objectives?
It is pushing environmental protection higher on the list of priorities
What is meant by ‘sustainable government finances’?
Balancing the budget while managing both borrowing and debt
What is the significance of improved public services (ie healthcare) in macroeconomic objectives?
It includes enhancements in healthcare and education
True or False: Economic growth always leads to improved income equality.
False
What is a potential consequence of not achieving inclusive growth?
Income inequality may rise
