4.1.1

Possible Objectives

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Objectives of Government Economic Policy

Government macroeconomic policy can be used to achieve a range of objectives. Objectives are the goals of government policy. Governments try to achieve aims using instruments.

Illustrative background for Sustainable economic growthIllustrative background for Sustainable economic growth ?? "content

Sustainable economic growth

  • Economic growth is defined as an increase in real GDP. That is an increase in the real value of goods and services produced in an economy in a given period of time.
  • Governments aim for sustainability - in terms of the environmental impact, but also in terms of promoting long-term growth that avoids busts.
  • Higher economic growth leads to rising real incomes and a higher standard of living.
Illustrative background for Price stabilityIllustrative background for Price stability ?? "content

Price stability

  • Most governments aim to keep inflation, or the rate of increase in prices, low and stable.
  • Price stability can be measured in different ways. The most common of which is changes in CPI (The Consumer Price Index).
  • Governments have different inflation targets e.g. the UK government target for inflation is 2%, whereas India is 4%.
Illustrative background for Low unemployment Illustrative background for Low unemployment  ?? "content

Low unemployment

  • Governments aim to have low unemployment.
  • Full employment is not 0% unemployment because there will always be some people temporarily unemployed.
Illustrative background for Sustainable fiscal deficit and national debtIllustrative background for Sustainable fiscal deficit and national debt ?? "content

Sustainable fiscal deficit and national debt

  • A fiscal deficit is when a government spends more than it receives in tax revenue in a given time period.
  • So, governments must borrow. Governments will aim to reduce this amount of borrowing.
  • If interest payments on the national debt are high, this has a high opportunity cost – this is money that could be spent on education or hospitals.
  • Government debt is 'public debt'. The debt owed by households is 'consumer household debt'.
Illustrative background for Low income inequality and povertyIllustrative background for Low income inequality and poverty ?? "content

Low income inequality and poverty

  • Governments do not tend to have explicit targets for inequality and poverty but they do not want it to get too large.
  • High inequality and poverty can lead to social unrest as well as impact the standard of living.
  • Inequality can be measured in different ways, the most popular of which is known as the Gini Coefficient.
Illustrative background for Stable current accountIllustrative background for Stable current account ?? "content

Stable current account

  • Although governments do not have explicit targets for the current account, they do try to improve their international competitiveness.
  • So exports are promoted.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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