Unit 2- What Are The Economic Objectives Of The Government Flashcards
What is economic growth?
It refers to growth of output in the economy over time; a growth of real GDP over time.
What is full employment?
It is when everyone who is able and willing to work has a job.
What is price stability?
It means keeping inflation low.
What are the objectives of government policies?
Maintaining full employment, economic growth, achieving price stability and balancing exports and imports.
What is balancing exports and imports?
The government aims for a balance between exports and imports.
What does the fiscal policy aim for?
It is aimed to change the level of aggregate demand in the economy through changes in taxation and the government’s own spending.
What does interest rate policy aim to do?
It aims to change the level of aggregate demand in the economy by making changes to interest rate.
What do supply side policies aim to do to an economy?
They aim to increase the economy’s capacity to produce more goods and services.
What is gross domestic product (GDP)?
The total value of goods and services produced in the country in a year.
What is GDP per capita?
GDP divided by the total population.
What is the claimant count?
It measures the unemployment according to the number of people claiming unemployment related benefits.
What is the labour force survey?
A survey of a sample of households and counting people as unemployed if they are actively seeking work.
What is voluntary unemployment?
It is caused by people choosing not to work.
What are the six types of unemployment?
Voluntary unemployment, seasonal unemployment, frictional unemployment, structural unemployment, technological unemployment and cyclical unemployment.
What is seasonal unemployment?
Caused by seasonal workers not being employed in other times of the year.
What is structural unemployment?
It is caused by a long term change in the structure of an industry often declining.
What is technological unemployment?
It is caused by capital taking the place of labour.
What is cyclical unemployment?
This is caused by a fall in aggregate demand in the economy.
What is inflation?
A sustained rise in the general price level over time (CPI).
What is the rate of inflation?
The rate at which the general price level rises over time.
How is inflation measured?
Using the consumer price index which looks at the cost of consumer goods, a rise in the general price of consumer goods can cause inflation.
What is monetary inflation?
Inflation caused by growth in the economy’s money supply.
What is demand pull inflation?
Inflation caused by excess demand in the economy.
What is cost push inflation?
Inflation caused by a rise in costs in the economy.
