2) Objectives of gov economic policy + employment and unemployment

Macroeconomics

the economy as a whole on a national scale

macroeconomic objective

goals the gov want to achieve for the macroeconomy

policy conflict

when two policy objectives cannot be achieved at the same time

Balance of payments

a record of all financial transactions between one country and the rest of the world in a particular time period. Made up of the current account, financial account and capital account

Current account

records transactions related to the exchange of goods, services, and income, like imports and exports. Made up of trade in goods, trade in services, primary income (income flows) and secondary income (transfers)

balance of trade

the difference between monetary value of a country’s imports and exports

exports

goods/services sold abroad

imports

goods/services bought from abroad

inflation

the persistent or continuing rise in the average price lever over a period of time

deflation

the continuing tendency for the average price level to fall. it is negative

disinflation

when the rate of inflation is falling but still positive

RPI

a measure formerly used to calculate rate of consumer price inflation in UK. very unpredictable

CPI

official measure used to calculate rate of consumer price inflation in UK. it calculates the average price increase of a basket of around 600-700 goods/services

economic growth

the increase in the production and consumption of goods and services in an economy over a period of time

short run economic growth

growth of real output resulting from using idle resources, including labour, thereby taking up slcack in the economy

long run economic growth

an increase in the economys potential level of real output, and an outward movement of the economys ppf

recession

2 consecutive quarters of negative economic growth

GDP

sum of all goods and services produced in the economy over a period of time

real GDP

GDP adjusted for inflation

real GDP per capita

GDP adjusted for inflation, divided by the population

nominal GDP

GDP, not adjusted for inflation

unemployment

those of working age that are currently out of work but are actively seeking work as they are willing and able

labour force

those of working age who are either in work or actively seeking work

unemployment rate

number of unemployed people expressed as a percentage of the current labour force

full employment

when the number of workers willing to work equals the number of workers employers wish to hire. when 3% or less of the population are unemployed

claimant count

method of measuring unemployment according to those people who are claiming unemployment related benefits

labour force survery

quarterly sample survey of households in UK. its puprose is to provide info on the UK labour market

redistribution of wealth and income

how evenly incomes are shared out between individuals and households across the economy

environmental sustainability

encouraging economic growth without harming the environment

balanced budget

when gov spending equals gov revenue

budget deficit

when gov spending is greater that gov revenue

budget surplus

when gov spending is less than gov revenue

economic objectives

Trade balance, low Inflation, sustainable Growth, full Employment, Redistribution of wealth and income, Reduced fiscal deficit

Economically inactive

those who are of working age but are neither in work nor actively seeking paid work

types of unemployment

• cyclical

• structural

• frictional

• seasonal

frictional unemployment

unemployment due to people moving between jobs or joining labour market for the first time

cyclical unemployment

unemployment due to a lack of demand for a good or service e.g. a recession

structual unemployment

unemployment due to the decline of an industry. leads to occupational + geographic immobility

seasonal unemployment

unemployment due to jobs not being needed all year round e.g. strawberry pickers

which types of unemployment are demand side and which are supply side?

demand side - cyclical

supply side - frictional, seasonal, structural

consequences of unemployment

• loss of income

• negative multiplier effects

• loss of national output

• fiscal costs

• social costs

government policies to reduce unemployment

• increased education and training

• incentive changes, e.g. higher minimum wage, reductions in income tax,

• employment subsidies, e.g. the kickstart scheme

benefits of falling unemployment

• increased employment boots real GDP

• higher living standards so less strain on NHS or police force

• higher demand helps businesses

disadvantages of falling unemployment

• extra spending on expanding labour market may worsen fiscal deficit

• risk of acceleration in demand may cause inflation