Government Objectives and indicators

What are all the government objectives - big 4 then the rest

Achieve economic growth and improve living standards

Lower unemployment

Keep inflation at 2%

Attain satisfactory Balance of payments

Balance the budget

Ensuring that income is fairly distributed

What is GDP

Gross domestic product is the sum of all goods and services produced in an economy over a given time period

What increases economic growth

Increase in GDP

Define Unemployment

A person is considered if they are able and willing to work but cannot find a job

Unemployment is the percentage of people who are able and willing but cannot find a job

What is the main function and roles of the Bank of England

Deciding interest rates

Overseeing money supply

Managing foreign reserves

Providing banking facilities for consumers (lending, deposits)

Regulation of UK banking system

Lender of last resort

Define exchange rates

The value of one currency for the purpose of conversion to another

What are the two measurements for unemployment

Claimant count

Labour force survey

What is the claimant count

measures the amount of people eligible for job seekers allowance (JSA)

Can give a false value as unemployed may claim benefits and still work - they will be included

Also many unemployed may not both to inform authorities that they cannot work

Cannot claim full amount of JSA if partner is working

What is the labour force survey

Measures unemployment by including people who have looked for work in the past month and can work in the next two weeks

Give pros and cons of the accuracy of the measurements

Pros: Figures are up to date

Fairly large sample size

Benefit fraud is uncommon in the uk

Cons: There is lots of hidden unemployment

Sample size is 40k in population of 60 million

Problems with unemployment

Less government revenue in the form of income tax and less expenditure so also less tax

More benefits paid to the unemployed - higher gov expenditure

Larger budget deficit

Wasted resources- opportunity cost of workers being unemployed less output in the economy

Social Problems, crime, divorce

Miss out on training - people out of work for a long time lose confidence -smaller LRAS

Less exports

Define inflation

Sustained increase in the general price level

What does the cost of living measure

Changes in the cost (Average) for UK households buying a basket of goods and services

How is the cost of living measured

The retail price index (RPI)

The consumer price index (CPI)

What does the CPI look at to make a measurement

Consumer price index looks at a basket of goods

700 different goods, 180,000 different price quotes from 140 areas around the UK

The basket of goods is updated annually to best reflect what UK consumers are purchasing

What is deflation

Sustained decrease in the general price level over a time period

What is disinflation

Decrease in the rate of inflation - however it is still positive

Give 3 examples of trade offs between government objectives

Employment and inflation

Employment and balance of payments

Economic growth and income equality

Define productivity

The amount of input from each worker