8 Mirco economic objectives Flashcards
(9 cards)
Sustainable economic growth
Economic growth is best defined as a long-term expansion of the productive potential of the economy.
Sustainable can mean:
a. Avoiding rapid economic growth which is then followed by falling economic growth and a recession, known as “boom and bust”.
b. Achieving economic growth which is consistent with maintaining low inflation
c. The environmental impact of growth.
Economic growth can be measured by the growth of real gross domestic product.
Short Run Economic growth is defined as an increase in real gross domestic product.
Stable low inflation
Inflation is a sustained increase in the general price level
Inflation leads to a fall in the purchasing power of money.
The Government‘s inflation target is 2.0% for the consumer price index.
The consumer price index (CPI) is a weighted price index which measures the monthly change in the prices of goods and services.
Disinflation is a falling rate of inflation (the general price level is still rising but at a slowing rate)
Deflation is a fall in the general price level (the general price level is falling)
· Be careful to learn that a fall in the rate of inflation (disinflation) is not the same thing as a fall in the general price level (deflation)
A low rate of unemployment
The unemployed are people who are able, available and willing to work at the going wage rate but who cannot find a job despite an active search for work.
This last point is important for to be classified as unemployed, a person must show evidence of being active in the labour market.
The rate of unemployment is the percentage of the labour force that are classified as unemployed.
Government may aim to achieve full-employment – a situation where all those able and available to find work have the opportunity to work.
A Satisfactory Balance of Payments position
The Balance of Payments Account records the values of all transactions between economic agents (households, firms, and government) between the UK and the rest of the world.
The section called the current account of the balance of payments is the section which requires attention.
The Current Account records the UK Exports and Imports of Goods and services. If the value of UK exports greater than the value of UK imports, the current account would be in surplus, but the UK Current Account has been in deficit for many years.
The current account of the balance of payments also include Investment Income and Transfers
The balance of payments also has a capital account and a financial account
Control over the size of the budget deficit and the total national debt.
The budget deficit is the amount by which government spending exceeds government revenue (taxation receipts) in a particular time period.
The government finances a budget deficit by issuing (selling) bonds on the financial markets
The national debt is the total amount of accumulated government debt resulting from past government borrowing that is owed by the UK government. It is the stock of debt owed by the UK government both to UK residents and financial institutions and also foreign individuals and financial institutions. It has built up over many years as many UK governments have run budget deficits.
A fall in poverty
Absolute Poverty
– A household income insufficient to allow a basic standard of living involving basic social and economic participation
Relative poverty
– Extent of low income compared to others income
– Poverty line is often identified at households living on less than 60% of median incomes
For example the government may have the objective of cutting child poverty and reducing pensioner poverty over the next few years
Improvements in productivity and capital investment
This is designed to improve the UK‘s international competitiveness and boost our international trade performance.
The pressures of globalisation and the increasing competition within the European Union Single Market make this one of the most important long-term objectives of the government.
Improvements to public services
education, health, transport, flood defences, criminal justice.
Overall aim
Overall, the aim in trying to achieve all of these macro-economic objectives is to improve living standards for the people of the country.
The standard of living is a measure of the material welfare of a population; the amount of goods and services available to the population of a country. It can be difficult to assess. A common measure of the standard of living is real gross domestic product per capita, but there are many alternative measures as well
