Economic growth

• What is the primary objective of government economic policy?

  The primary objective is to achieve economic growth.
• How does economic growth generally affect the standard of living in a country?

  It generally improves the standard of living.
• What are the four objectives of macroeconomic government policy?

  1. Achieve economic growth and improve living standards. 2. Create and maintain full employment. 3. Limit or control inflation. 4. Attain a satisfactory balance of payments.
• What do governments look at to judge the success of particular targets?

  Governments look at performance indicators.
• Is it common for a country to achieve all of its macroeconomic aims simultaneously?

  No, it is rare for a country to achieve all of its macroeconomic aims at the same time.
• What are some macroeconomic objectives that countries aim for?

  • Sustainable and balanced economic growth
  • Low unemployment rate
  • Price stability
  • Equilibrium on the external balance of payments
• What difficult choices do governments face regarding macroeconomic objectives?

  Governments must decide which objectives should be prioritized over others.
• How do economic growth and inflation conflict with each other?

  Economic growth leads to higher demand for goods, which can strain supplies and push prices up, resulting in inflation.
• What is the impact of high economic growth on income inequality?

  High economic growth can widen inequality if lower-class wages do not rise at the same rate as upper-class wages.
• What are the potential benefits of high economic growth?

  High economic growth can create job opportunities and increase government benefits.
• What is the relationship between consumer spending and inflation during economic growth?


  Higher consumer spending during economic growth can lead to inflationary pressures due to increased demand for imports.
• What is national income used to assess?


  Changes in living standards in a country and between countries over time
• How is national income defined?


  As the total value of goods and services produced in an economy in a given period of time
• What is national income equivalent to?


  National output or GDP
• What is often correlated with higher GDP?


  Higher incomes and a higher standard of living
• How can national income data be used over time?


  To see whether people are generally getting richer over time
• What is a limitation of national income data?


  It does not account for population differences when comparing GDP
• What can improve national income data?

  Looking at GDP per capita
• What does nominal GDP represent?


  GDP at current prices, not adjusted for inflation
• Why should we use real GDP instead of nominal GDP?


  Because real GDP is adjusted for inflation
• What is a source of inaccuracy in national income data?


  Poor data collection agencies in some countries
• How can two countries have the same reported real GDP?


  One may have a larger shadow economy, indicating actual income is higher
• What does national income aggregate represent?


  The country's entire output
• What does it mean if a country can produce the same amount of goods in a shorter time?


  That country is said to be more productive
• What does GDP measure?


  The total value of traded goods and services
• What is sustainability defined as?


  The ability to meet the needs of the current generation without compromising future generations
• What is a limitation of GDP regarding quality of life?


  It does not distinguish between goods and services that add to quality of life and those that do not
• What are "negative expenditures" in GDP?


  Expenditures that do not improve quality of life, such as cleaning up graffiti
• How can the composition of GDP differ between countries?


  One country may prioritize healthcare while another prioritizes unhealthy consumption
• What is the primary aim of government macroeconomic policy?


  To achieve a range of objectives.
• What are the objectives of government economic policy?


  • Sustainable economic growth
  • Price stability
  • Low unemployment
  • Sustainable fiscal deficit and national debt
  • Low income inequality and poverty
  • Stable current account
• How is economic growth defined?


  As an increase in real GDP.
• What does sustainable economic growth aim to promote?


  Long-term growth that avoids economic busts.
• What is the relationship between higher economic growth and living standards?


  Higher economic growth leads to rising real incomes and a higher standard of living.
• What is the definition of low unemployment in government policy?


  Governments aim to have low unemployment.
• What is a fiscal deficit?


  When a government spends more than it receives in tax revenue.
• What is public debt?


  Government debt.
• Why do governments care about low income inequality and poverty?


  High inequality and poverty can lead to social unrest and impact the standard of living.
• What are the conflicting objectives of governments?


  • There is no agreement on the best target.
  • Macroeconomic objectives are not mutually exclusive.
  • High unemployment negatively impacts fiscal deficit.
• What is a consequence of rapid economic growth on income inequality?


  It could increase income inequality, especially if growth is concentrated in certain areas.