Macroeconomic Objectives and Policies 8 (J) done Flashcards
5 economic objectives
- sustainable economic growth
- full employment
- price stablility
- equitable income distribution
- more efficient resource allocation
- sustainable economic growth
increase capacity of economy to increase standard of living.
- aim of sustainable rates that are non inflationary and resource efficient 3-4%
- full employment
a job for everybody that wants to and able to work
- approach NAIRU (non accelerating inflationary rate of unemployment) 4.5%
- full use of resources maximises capacity to produce and minimise the adverse economic and social problem of unemployment
- price stability
little or no sustained, appreciable rise in the general price level
- inflation at 2-3% on average over the economic cycle as high inflation reduces value of income, competitiveness, and causes uncertainty and loss of confidence
- equitable income distribution
balance of efficiency, rewards and incentives with fairness (equity)
- policies to reduce the gap between the wealthy and those in poverty is growing world wide
- reduce welfare dependancy
- a more efficient resource allocation
structural changes
- includes technical, allocative and dynamic
Technical efficiency
combining resources more productively
Allocative efficiency
minimising resource waste, sending resources to where they are most useful
Dynamic efficiency
ability to adapt and change over time
main role of macroeconomic policies
to stabilise large fluctuations in the business cycle. policies tend to influence level of AD
fiscal policy definition
a macroeconomic policy that implements government spending, taxation and the budget outcome to achieve management of the economy
main fiscal policy tool
Government annual budget
2 tools gov can use for fiscal policy
- automatic stabilisers
- discretionary measures
automatic stabilisers do not…
require any gov intervention to operate
what do automatic stabilisers do
boost aggregate demand during periods of recession and lower aggregate demand in a boom period when the economy expands