Four Main Objectives of a Government's Macroeconomic Policy


1) Economic Growth - (improve living standards & levels of economic welfare.)

  • Short-run growth happens when there is a movement from a point inside the economy's PPF to a point on the the frontier. This occurs when there are unemployed resources or 'slack' in the economy.
  • Long-run growth results from an outward movement of the PPF.
  • Economic growth occurs where there is an increase in Gross Domestic Product (GDP).
  • GDP growth - measures increase in income (output & exenditure).
  • Nominal GDP - measures increase in incomes as a result of an increase in the volume of output & prices (inflation).
  • Real GDP measures the volume of goods & services produced in an economy. It adjusts nominal GDP by deducting any increase in it caused by inflation (price increases).
  • Real GDP is the most important measure of living standards.

2) Full Employment & Unemployment:

  • Full Employment - those who seek employment are employed.
  • There will always be some unemployment, simply because the economy is constantly changing, with some jobs disappearing while new jobs are created.
  • Two methods are used to measure unemployment in the UK: 1) The Claimant Count measure, 2) The Labour Force Survey (LFS) measure.
  • Figures of the LFS are taken from a sample of the whole population. The survey…


No comments have yet been made