9 - Measuring macroeconomic objectives

Macroeconomic objectives (definition)

• goals set by the government aimed at improving the overall economic performance of a country as well as the quality of life of its citizens

Macroeconomic objectives (list)

• economic growth

• environmental protection

• balancing gov budget

• minimising unemployment

• stable balance of payments on current account

• equity in distribution of income

economic growth

sustainable real GDP growth of 2-3% boosts employment, income and public finances

Price stability

• inflation target is 2% using consumer price index(CPI)

• low rate of inflation is desirable as it is as symptom of economic growth

low unemployment

• target is 4-5%, close to full employment

• GDP growth reduces unemployment

balance of payments stability

• aims to reduce trade deficit, UK offsets good deficit with stronger services exports

balanced gov budget

• targets reduced borrowing and public debt, which surged during COVID

environmental protection

ambitious targets include 78% emissions cut by 2035 and full renewable energy by 2035

income inequity

gov aim to reduce inequality (e.g. via taxes + merit goods), targeting gini coeffificent of 0.3-0.4

Measures of econ growth

• nominal GDP

• real GDP

• real GDP per capita

nominal GDP

value of all goods and services produced in an economy in a 1 year period

real GDP

nominal GDP that is adjusted for inflation

real GDP per capita

real GDP divided by total production of country

Measures of inflation

• Consumer price index (CPI)

• Retail price index (RPI)

Consumer price index (CPI)

measures change in price of fixed basket of consumer goods

Retail price index (RPI)

Same as CPI but includes some items not in the CPI, such as council tax and mortgage interest payments

Measures of unemployment

• Labour force survey

• claimant count

labour force survey

survey that asks 60-70,000 UK households to self classify as being employed, unemployed or economically inactive

Claimant count

counts number of ppl claiming job seekers allowance(JSA) and those looking for work that claim universal credit (UC)

Balance of payments on the current acount

• balance of payments

• balance of payments on the current account

• balance of trade in goods and services

balance of payments

record of all flows of money between residents of one country and rest of world

balance of payments on the current account

section of the balance of the payments that records international trade in goods, services, primary and secondary income

balance of trade in goods and services

values of exports of goods minus value of imports of goods.

Trade surplus

when value of exports are greater than value of imports

Trade deficit

when value of exports is less than value of imports