Part One: Economic Policies and Management

Question 1

What are the economic objectives?

Answer 1

Economic Growth 
Full Employment 
Price Stability / Low Inflation 
External Stability 
Distribution of Income and Wealth 
Environmental Sustainability

Question 2

What are the economic targets?

Answer 2

Economic Growth: 3% to 4% in real GDP
Full Employment: NAIRU
Price Stability: 2% to 3% inflation
External Balance: CAD < -5% of GDP

Question 3

What are the key conflicts between the objectives?

Answer 3

Unemployment and inflation
EG and External balance
EG and environmental sustainability
EG and income inequality

Question 4

What is autonomous consumption

Answer 4

Is the amount of consum[tion that would occur even if income were zero

Question 5

What are the influences on consumption

Answer 5

Income
Distribution of income
Interest rates
Consumer expectations

Question 6

Why is investment considered autonomous

Answer 6

Investment decisions in the economy are not affected by national income

Question 7

What are the influences on investment

Answer 7

Changes in Intrest Rates
Changes in govt. policies
Changes in the price and productivity of labour
Expectations of the future

Question 8

What is the macroeconomic policy

Answer 8

The main role is to manage the business cycle through countercyclical policies. The govt. policies influence the level of aggregate demand

Question 9

How effective are macroeconomic policies

Answer 9

Effective to stabilise the fluctuations in the business cycle in the short term, but less effective in dealing with longer term problems like IC, high foreign debt and low levels of national savings