Objectives of Government Economic Policy Flashcards
What are the four macro objectives?
economic growth, price stability, full employment, balance of payments
Give three benefits of economic growth.
job creation, rising incomes, improves standards of living
What is real GDP?
a measure of all the goods and services produced in an economy, adjusted for price changes/inflation
Give a limitation of GDP
it doesn’t take into account the hidden economy (unpaid work)
Give three benefits of low unemployment.
higher consumption due to higher incomes, higher tax revenue for government, improved productivity of UK economy
What does it mean if someone is unemployed?
they are of working age and actively seeking work in the labor market
Give the two methods that measure unemployment.
claiment count & labor force survey
What is inflation?
the rate of change of average prices in an economy from one quarter to the next
Why is a 2% inflation rate optimal?
it encourages people to buy now as they know it will be more expensive later on
What is CPI?
a measure of inflation that calculates the average price increase of a basket of different consumer goods and services (doesn’t include house prices)
Give two limitations of CPI.
it doesn’t represent the poorest regions or take into account shrinkflation
