Topic 12-macroeconomic Objectives

Question 1

1. Macro economic

economic growth

Answer 1

The speed of which GDP is increasing
most important of all macro economic objectives
Economic growth is needed to improve the well-being of citizens as resources available with in an economy expands

Question 2

2. Macro economic
   unemployment
   Cyclical unemployment/ demand deficiency unemployment

Answer 2

caused by lack of spending in the economy here the government may try to boost AD (gov spending is a component of AD)&there will be multiplier effects

Question 3

2. Macro economic
   unemployment
   Cyclical unemployment/ demand deficiency unemployment
   Evaluation

Answer 3

• Some economists argue that the multiplier effect is very small&the effects of government policy on the economy will be very small&will result in debts in future
• The little that governments do has large time lags. By the time the policy comes into effect the reverse is needed
• economists argue that the only reason that this kind of unemployment exists is because workers will not accept lower wages

Question 4

2. Macro economic
   unemployment
   Structural unemployment

Answer 4

When industries are in decline there will be A large amount of unemployed workers who cannot easily move into new jobs (lack of skills).
A boost in A.D. by increased government spending is unlikely to help prevent this problem unless the government spends on retraining workers are subsidising firms willing to take on workers to be retrained on the job

Question 5

2. Macro economic
   unemployment
   Structural unemployment
   Evaluation

Answer 5

• There is an opportunity cost to subsidising firms and individuals the money could have been spent elsewhere and raising the money means that other people have to pay more tax
• people have very different skills from ones required employers that it will cost more time&effort to retrain workers than to give them benefits

Question 6

2. Macro economic
   unemployment
   Fictional unemployment

Answer 6

-occurs when people are between jobs here the gov can reduce unemployment by improving information flows&extending services currently offered by job centres

Question 7

2. Macro economic
   unemployment
   Fictional unemployment
   Evaluation

Answer 7

• Frictional unemployment is not a significant problem any maybe better not spend more money on this area. There is always an opportunity cost to government spending
• Many people don’t need help from the gov in finding a new job and only a small section of the workforce and certain types of workers use the services of job centres

Question 8

2. Macro economic
   unemployment
   Classical unemployment

Answer 8

Classical unemployment occurs when there are problems with the supply side of labour E.g the minimum wage is too high or unemployment benefits are too high here the government might want to spend less rather than more

Question 9

2. Macro economic
   unemployment
   Classical unemployment
   Evaluation

Answer 9

• Some economists argue that while in the classical view there is low unemployment
• much unemployment is cyclical rather than fast this is my unemployment rises in a recession

Question 10

3.Macro economic

Balance of payments

Answer 10

• The objective of removing persistent deficits is the idea that the country should reduce its imports and increase exports.
• where money is always flowing out of the country it will be handy for overtime unemployment will increase and future generations will pay the cost of overspending on today

Question 11

3.Macro economic
Balance of payments
Evaluation

Answer 11

Surplus can be a problem as much as deficits. too much money flowing into a country can be inflationary
A floating exchange rate can solve the problem if there is a BOP deficit we expect the value of the currency to fall making exports cheaper and imports more expensive, which in theory remove the deficit