Topic 6

Question 1

What are the 4 main policy objectives?

Answer 1

1. achieve economic growth and improve living standards and levels of economic welfare
2. create and maintain full employment or low unemployment
3. limit or control inflation, or to achieve some measure of price stability
4. attain a satisfactory balance of payments, usually defined as the avoidance of an external deficit which might create an exchange rate crisis

Question 2

Short-run growth

Answer 2

occurs when there are unemployed resources or slack in the economy is when there is movement from a point inside the economy’s production possibility frontier to a point on the frontier. also called economic recovery

Question 3

Long-run growth

Answer 3

results from an outward movement of the production possibility frontier

Question 4

When does full employment occur?

Answer 4

in the economy’s aggregate labour market at the market-clearing real-wage rate when the number of people who want to work equals the number of people employers want to hire

Question 5

2 methods of calculating unemployment

Answer 5

claimant account

labour force survey