Macroeconomic objectives and policys 2.6

Types

What are the different types of government objectives

• Goverment budget

• economic stability

• Protection of enviroment

• Productivity

• BofP

• unemployment

• Low and stable inflatieon

• Economic growth

What is the goverment aim of economic growth

• To have high economic growth to improve the standard of living

• And to increase the productive potential of an economy

What are the two types of growth

• Long run - potential growth

• short run - actual growth

What is the govement aim of low unemployment

• The move towards full employment to increace RNO and income

• employment means they are working at thier full capacity

What are the types of unemployment

• Cyclical

• seasonal

• structural

• Frictional

What are reasons for immobility

• Occupational

• Geographical

How id labour a derived good

The demand for labour is a derived demand because it depends on the demand for the goods and services that labour helps to produce.

What is the conflict between inflation and BofP

• Low inflation = higher investment rates incouraging forign investment increacing value of the pound

Economic growth and inflation conflict

• Atempts to keep inflation low can restrict growth due to high intrest rates

Economic growth and enviroment conflicts

• Strain on enviroment

• sweating of reacources

• Long run damage

Inflation and unemployment conflicts

• Using the philips curve inflation and unemployment have a relationship

Except in stagflation

Economic growth and inequality

• Tax and welfare payments may damage future growth to ensure equality

How do goverments tackle sustainability

• Encourage the development of renewables using fincaial insentives

How should goverments tackle Damage and polution

• Identify and mesure costs

• penalties, restrictions and bans to reduce harm

• Non-market outright bans eg. bans on cars

• Market policies = influnceing cost of pollution

what do earnings depend on

• Labour skill

• Market forces

• Geography

• Leval of responsability

what does goverments use to adress income inequality

• Tax and welfare payments

However…

• reduces incentives to work harder

• spending = jobs

What do govements do to try and corrct the BofP

• Reduce price of domestic goods

• tarrifs

• devalue or deprice the currency to make exports cheaper

• fiscal and monetry policy

what are the accounts the BofP is made up of

• Trade in goods

• trade in services

• primary income

• secondry income

What is the state of the BofP in the UK

• Trade deficit in visable trade eg. exports imports

• trade surplus in invisable trade eg. Services

What are the two types of inflation

• Cost push inflation

• Demand pull inflation

what are bottle neck shortages

Bottleneck shortages occur when there is insufficient capacity or a shortage of a particular resource at one stage of production, preventing firms from increasing output to meet demand.

what can cause demand pull inflation

• money suply outgrowing output, bottle neck shortages, high demand for exports

what are the costs of inflation

• Competitveness decreaces

• hyperinflation

• uncertanty

• unemployment increaces

• investment decreaces

• shoe leather costs

what can cause cost push inflation

• Rise in wages, cost of raw matirials and indirect taxes

What is real wage unemployment

• If wages are above equilibrium eg.NMW

• leads to excess suply and unemployment

cost of lower employment

• Lower incomes

• Higher crime

• Lower AD

• increaced benifits cost

• reduced employability