Possible macroeconomic objectives

What are the four main macroeconomic objectives?

• Economic growth

• Low unemployment

• Low and stable inflation

• Balance of payments equilibrium

What is the UK’s long-run trend for economic growth?

Around 2.5% per year.

What do developing economies focus on before economic growth?

Economic development, which improves living standards, life expectancy, and literacy rates.

What is the government’s aim for unemployment?

Full employment, allowing for some frictional unemployment, aiming for an unemployment rate of around 3%.

Why is full employment important?

It ensures the labour force is used productively, improving economic output and living standards.

What is the UK’s inflation target?

2%, measured using the Consumer Price Index (CPI).

What happens if inflation moves more than 1% outside the target?

The Governor of the Bank of England must write a letter to the Chancellor of the Exchequer explaining why and outlining corrective measures.

What is a balance of payments equilibrium?

It ensures the country can sustainably finance the current account, supporting long-term economic growth.

Why do governments aim for a balanced current account?

To prevent a large trade deficit, which could lead to unsustainable borrowing and economic instability.

Why do governments aim for a balanced budget?

It controls national debt, making future borrowing cheaper and ensuring debts are manageable.

Why do governments aim for environmental protection?

To ensure sustainable use of natural resources (e.g., oil, gas) and reduce pollution, securing long-term environmental stability.

What is the purpose of income equality as an objective?

To reduce the gap between the rich and poor, promoting a fairer society and reducing economic disparity.