Measuring Macroeconomic Performance

• What are macroeconomic objectives?

  Goals set by the government for economic performance

  
• Why do governments set macroeconomic objectives?

  To improve economic performance and citizens' quality of life

  
• What is a challenge in achieving macroeconomic objectives?

  Some outcomes can conflict with each other
• What is the annual target growth rate for many developed nations?

  2–3%
• Why is a growth rate of 2–3% considered sustainable?

  It is less likely to cause excessive inflation
• How does strong economic growth affect government budgets?

  It leads to better government budgets
• What are the positive impacts of economic growth?

  Increased confidence, consumption, and employment
• What was the GDP growth rate in the UK for 2020?

  -11%
• What does a fall in real GDP indicate?

  The economy is contracting
• What was the GDP growth rate in the UK for 2021?

  7.6%
• What is the target inflation rate for the UK?

  2%
• What does a low rate of inflation indicate?

  It is a symptom of economic growth
• What are the two types of inflation that require different policy responses?

  Cost push and demand pull inflation
• What was the peak CPI inflation rate in the UK in 2023?

  8%
• What caused the inflation rates to exceed the target rate after the pandemic?

  Supply chain disruptions and increased spending
• What is the target unemployment rate for the UK?

  4–5%
• What does frictional unemployment imply?

  It is impossible to achieve 100% employment
• How does real GDP relate to unemployment rates?

  When real GDP increases, unemployment falls
• What was the unemployment rate for black individuals in the UK in 2021?

  11%
• What does a current account surplus indicate?

  Exports are greater than imports
• What is the Balance of Payments (BoP)?

  A record of financial transactions with the world
• What does a current account deficit signify?

  Imports exceed exports
• What is the significance of the UK's current account deficit?

  It is traditionally small and not problematic
• What is the UK government's aim regarding the budget?

  To run a balanced budget
• What happens if government expenditure exceeds revenue?

  There is a budget deficit
• What can excessive government debt lead to?

  Higher interest rates for borrowing
• What was the debt-to-GDP ratio in the UK in 2020?

  186%
• What is the UK government's environmental aim for 2035?

  To reduce emissions by 78%
• What does a higher Gini coefficient indicate?

  More unequal distribution of income
• What is the Gini coefficient for the UK in 2020?

  0.357
• What are the conflicts in achieving macroeconomic objectives?

  • Economic growth vs. inflation
  • Economic growth vs. environmental sustainability
  • Economic growth vs. inequality
  • Economic growth vs. balanced budget
  • Economic growth vs. current account balance
  • Low unemployment vs. low inflation

  
• How have macroeconomic objectives changed over time?

  • 1940s-1970s: Focus on economic growth and full employment
  • 1980s: Shift to free market economics and less government intervention
  • Current focus may prioritize different objectives based on government and societal changes
• What is the aim of the UK government regarding renewable energy by 2035?

  100% energy from renewable sources
• What is the relationship between economic growth and income inequality?

  High growth can lead to greater inequality
• What are the implications of cutting public sector pay to reduce the deficit?

  It may lead to social unrest and dissatisfaction
• What is the significance of the UK trade balance in 2021?

  It showed a significant decline from 2020
• What is the primary goal of the UK government regarding environmental protection?

  To ensure sustainable economic development
• What is the impact of COVID-19 on the UK government's budget?

  It has eroded progress towards a balanced budget
• How does the government aim to redistribute income?

  Through a progressive tax system and merit goods
• What is the aim of the UK government regarding youth unemployment?

  To reduce it to acceptable levels