Objectives of Government Economic Policy Flashcards

1
Q

What are the four macro objectives?

A

economic growth, price stability, full employment, balance of payments

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2
Q

Give three benefits of economic growth.

A

job creation, rising incomes, improves standards of living

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3
Q

What is real GDP?

A

a measure of all the goods and services produced in an economy, adjusted for price changes/inflation

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4
Q

Give a limitation of GDP

A

it doesn’t take into account the hidden economy (unpaid work)

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5
Q

Give three benefits of low unemployment.

A

higher consumption due to higher incomes, higher tax revenue for government, improved productivity of UK economy

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6
Q

What does it mean if someone is unemployed?

A

they are of working age and actively seeking work in the labor market

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7
Q

Give the two methods that measure unemployment.

A

claiment count & labor force survey

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8
Q

What is inflation?

A

the rate of change of average prices in an economy from one quarter to the next

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9
Q

Why is a 2% inflation rate optimal?

A

it encourages people to buy now as they know it will be more expensive later on

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10
Q

What is CPI?

A

a measure of inflation that calculates the average price increase of a basket of different consumer goods and services (doesn’t include house prices)

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11
Q

Give two limitations of CPI.

A

it doesn’t represent the poorest regions or take into account shrinkflation

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