Macroeconomic Objectives

Question 1

What are the 7 Macroeconomic objectives?

Answer 1

1. Economic Growth
2. Low unemployment
3. Low and stable rate of inflation
4. Balance of payments equilibrium on current account
5. Balanced government budget
6. Protection of the environment
7. Greater income equality

Question 2

How does the gov ensure economic growth

Answer 2

A certain increase of GDP per year

Question 3

Why does the gov want low and stable inflation

Answer 3

Inflation = increase of average price level of goods and services = discourage people to consume = consumption is a big factor of AD
BUT want it to steadily rise as is an indicator of economic growth

Question 4

Why is protection of the environment important to gov

Answer 4

Because if bad environment future generations will suffer - we need to look in the long term

Question 5

Why is balance of payments important to the gomment

Answer 5

We don’t want a trade deficit where imports exceed exports because then you lose money

Question 6

What factors could collapse an economy?

Answer 6

1. War
2. External shocks (natural disasters)
3. Recession
4. If the economy grows too much, it could have negative effect on the environment, inflation

Question 7

What is the ideal level of growth per year

Answer 7

2-5%

Question 8

What is a zero hour contract

Answer 8

You don’t have a set amount of hours - only work when needed - so technically employed but may not earn any income

Question 9

Who controls inflation and how

Answer 9

Bank of England and by interest rates

Question 10

What is the ideal inflation rate

Answer 10

2% per year