3.2.1.1 Government objectives

what are government objectives

goals that the government wish to achieve for the economy

what are the main government objectives

1. low and stable inflation

2. low unemployment

3. economic growth

4. stable balance on current account

5. balancing the budget

how many main government objectives are there

5

why is low and stable inflation an objective

high inflation causes uncertainty and people will be able to buy goods and may buy foreign imports instead and therefore businesses won't expand

what is inflation

the sustained increase in the general price level

what is the ideal inflation rate for developed countries

2%

why is low unemployment an objective

less welfare benefits paid so therefore more tax paid to the government so therefore more government revenue

what is economic growth

the increase in gdp in an economy over time

what is gdp

the total value of the goods and services produced in a country in a given year

why is stable balance of current account an objective

if a country has more imports than exports in the long run it can lead to exchange rate depreciation

what does balance of current account measure

the difference between the value of goods and services sold abroad and the value of goods and services from abroad

what is balance of payments

A record of payments between one country and the rest of the world

what are macroeconomic indicators

statisitics/data used to represent the achievement of macroeconomic goals

how many indicators are there

7

what are the macroeconomic indicators

real gdp

what are the two types of unemployment

claimant count and labour force survey

what are the 2 types of indicators

lag (about the past/present) and lead (about the future)

what is real gdp

GDP adjusted for inflation

if economic growth was 2% in 2016 and 1% in 2015 what has happened to the growth

it has increased at a slower rate

if economic rate is negative than

the rate has decreased

real gdp per capita is used to

make comparisons

what are the three ways to calcuate

output approach measures total value of all final goods and services

to work out real gdp

nominal gdp x 100/100+inflationrate

what are the 2 measures of inflation

consumer price index and retail price index

how does the cpi work

measures overall change in consumer prices over time

how does rpi work

measures change in cost of a sample of retail goods and services

what is unemployment

those in the labour force willing and looking for work but without paid work

what does the claimant count record

number of people receiving unemployment benefits from the government

what is productivity

a measure of efficiency that compares outputs with inputs

what is labour productivity

the number of units output produced per input unit of labour

capital productivity

the number of units output produced per input unit of capital

what are index numbers

simple way of making it easier to compare numbers over a period of time

what is the base year

the period in which all other periods are compared to

what is the base year value

100

what does the change in index numbers show

how far the variable has moved away from its starting value

inflation rate equation

CPI this year - CPI last year / CPI last year x 100

what is a weighted index

an average index made up of a combination of other indices

what is a example of a weighted index

consumer price index