2.6.1 -> macroeconomic objectives and policies theme 2 -the UK economy - performance and policies

economic objectives

we measure the success of an economy by looking at whether it achieves the objectives

economic objectives all

low inflation
low unemployment
positive economic growth
balance of payments

low inflation

- uk has a target inflation rate of 2% using the CPI
- important bc it allows firms to confidently plan for future investment and offers price stability to consumers

low unemployment

- high unemployment -> less tax earned by gov and people not earning enough money to purchase from shops = less purchases
- gov has to pay unemployment benefit

positive economic growth

increased output = less unemployment = more job opportunities

balance of payments

is a record of all the financial transactions that occur between it and rest of the world
- the ideal is import = export
- export > import = surplus
- import > export = deficit

additional 3 objectives

- sustainability and protection of environment
- balanced government budget
- redistribution of income

balanced gov budged

stops overspending
presented annually and includes the revenue (sales) and expenditure (gov spending)
if expenditure > revenue = budget deficit = debt
if debt too high = lenders lose confidence in gov's ability to repay debt = gov raises interest rate , $$$

redistribution of income

to achieve income equality
high levels of income inequality creates social unrest and can lead to revolutions