Macroeconomic Objectives and Circular Flow

What are the seven macroeconomic objectives

1) Real Economic Growth per capita

2) Low Inflation of 2% (with a tolerance of 1% either way)

3) Low Unemployment / Full Employment

4) A Stable, Balanced Current Account

5) To Reduce the National Debt

6) To Reduce Inequality

7) To Reduce Environmental Damage

What is GDP?

GDP – Gross Domestic Product – is the value of all the finished Goods and  Services produced in an economy over a period of time.

Difference between nominal GDP and real GDP

Real GDP accounts for inflation, whereas nominal GDP doesn’t

What is an index number.

A number used when making comparisons over time regarding changes in real GDP

What is the index number of the ‘base year’?

100

What does a index number greater than 100 indicate?

A rise from the base year

What does a index number less than 100 indicate?

A fall from the base year

What is inflation

The rate at which the price of goods increase overtime