Macro Economic Objectives

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Four Main economic Objectives
1) Sustainable economic growth 2) Low unemployment 3) Control Inlfation (CPI =2%) 4) Satisfactory Balance of Payments (low current account deficit)
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Other 4 economic objectives
1) Stable exchange rate 2) Low government borrowing 3) Maintaining equality 4) Protecting the environment
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Real GDP per Capita
The average income of a citizen (taking into account inflation)
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Limitations of GDP as a measure (6 things)
1) difficult to calculate total output of economy as doesn't take into account underground economy
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number 2
2) negative externalities-overestimates living standards on this count
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number 3
doesn't take into account how hard people work
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number 4
ignores distribution of income
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number 5
depends what economy produces, eg it is preferable to spend on healthcare over military spending
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number 6
When comparing countries GDP- there will be different purchasing power of local currency eg in India a $ would buy more than in Japan
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Human Development Index (HDI)
Alternative measure of economic welfare; takes into account real GDP per capita also includes health and education standards
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Human Poverty Index (HPI)
This also takes into account distribution of welfare
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Causes of Growth (2)
1) in SR, increase in AD (AD=CIGS) 2) in LR increase in LRAS (productive capacity)
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Sustainable Economic Growth
1) low inflationary growth 2) Environmentally sustainable 3) Growth that is not dependable upon growing levels of personal debt
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Environmental Sustainability
In LR, growth has to be sustainable- if growth is caused by cutting down forests or creating pollution, it may lead to lower standards of living in the future
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Environmental Sustainability -resources
Wouldn't rely solely on non-renewable resources
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Other cards in this set

Card 2

Front

Other 4 economic objectives

Back

1) Stable exchange rate 2) Low government borrowing 3) Maintaining equality 4) Protecting the environment

Card 3

Front

Real GDP per Capita

Back

Preview of the front of card 3

Card 4

Front

Limitations of GDP as a measure (6 things)

Back

Preview of the front of card 4

Card 5

Front

number 2

Back

Preview of the front of card 5
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