2.6.1 Flashcards
possible macro economic objectives (12 cards)
what are the main macro economic objectives of government
1 economic growth
2 low unemployment
3 price stability ( low and stable inflation )
4 balanced government budget
5 balance of payments stability
6 environmental protection
7 income equality
why is price stability important to an economy
price stability reduces uncertainty, maintains purchasing power, encourages investment, and supports long term growth
what is meant by full employment
full employment occurs when all individuals willing and able to work at prevailing wage rates have jobs, allowing for a small level of frictional unemployment
what is the bank of england’s inflation target
2% cpi inflation with a tolerance at + - 1%
what is economic growth
increase in real gap, the increase is the real value of goods and services in an economy over a given period of time
what does high economic growth lead to
higher real incomes and living standards
how is price stability measured
through the cpi - consumer price index
what is a fiscal deficit
when the government spend more money than they receive through taxation in a given period of time causing them to borrow money
what is the issue with the government borrowing money
when the government borrow a large amount of money with a high interest rate it means they have a lot to pay back causing an opportunity cost as they money could of been spent somewhere else such as healthcare and educations
what is public debt
government debt
what is consumer household debt
household debt
