2.6.1 Macroeconomic Objectives

Economic Growth meaning?

Governments aim to have sustainable growth for the Long Run in the uk. This is about 2.5% in emerging or developing economy’s. Governments aim to improve living standards which increase life expectancy and literacy rate.

Low unemployment meaning?

Governments aim to have as close to full employment as possible. Frictional unemployment is accounted for by aiming for an unemployment rate around 3% the labour force should be employed in productive.

Low and Unstable rate off inflation meaning?

In the UK the government target is 2% and measured by CPI (consumer price Index). This aims to provide stability for firms and consumers helping them make decisions for the long run.

Balance of Payments Equilibrium Current Account meaning?

This allows the country to sustainably finance the current account which is important for long term growth.

Balance government budget meaning?

This ensures the government keeps control of state borrowing so national debt doesn’t escalate. This allows governments to borrow cheaply in the future, should they need to and make repayments easier.

Protection of the environment meaning?

This aims to provide long run environmental stability, it ensures resources such as oil and natural gas are not exploited and used sustainably so that future generations can access them to. Moreover it means there isn’t excessive pollution.

Greater income equality meaning?

This aims to minimise the gap between the rich and the poor and is generally associated with a fair society.

Why does the Government Intervene in the economy?

Governments intervene in the economy in an attempt to improve its economic performance.

What does Government do to achieve their macro economic objective?

The government’s manage demand through monetary or fiscal policy.

What does the government do in times of recession and in a boom?

They increase AD to increase employment and economic growth whilst in a boom they decrease AD to decrease inflationary pressures.

What are the 2 types of polices the government or the central bank can implement to slow or speed down the economy?

Expansionary and Contractionary Polices.

What does expansionary policy mean?

A policy designed to increase aggregate demand (AD) increase spending and promote economic growth when the economy is slowing down.

What does contractionary policy mean?

A policy designed to decrease aggregate demand (AD) decrease spending in the economy and slow down economic growth when there is high inflation and control inflation economy.

What is Monetary Policy?

Is controlled by the central bank and are changes in interest rates and the money supply and the main goal is to manage inflation and it is faster to implement.

What is Fiscal policy?

Is controlled by the government and are changes in taxation and government spending and the main goal is full employment and economic growth. Fiscal policy takes longer to implement.

What is Expansionary Monetary Policy?

Lowers interest rates to increase borrowing, spending and economic growth.

What is Expansionary Fiscal Policy?

Increase government spending and reduces taxes to increase aggregate demand and economic growth.

What is Contractionary Monterey Policy?

Raise interest rates to reduce borrowing, spending and inflation.

What is Contractionary Fiscal Policy?

Decrease government spending and increase taxes to decrease aggregate demand and inflation.