4.1.1 The objectives of government economic policy

• Economic growth involves increasing the productive capacity and output of the economy
• Match the macroeconomic objective with its description:

  Economic growth ↔️ Increasing productive capacity

  Full employment ↔️ Ensuring jobs for all

  Price stability ↔️ Maintaining low inflation

  Equitable income distribution ↔️ Reducing wealth inequality

  Balance of payments equilibrium ↔️ Sustainable import-export balance
• The objectives of government economic policy are often interconnected and require balancing.

  True
• Economic growth leads to higher standards of living
• Match the economic growth strategy with its impact:

  Investment in infrastructure ↔️ Enhances productive capacity

  Technological advancement ↔️ Drives innovation and productivity

  Education and training ↔️ Improves labor skills

  Fiscal policy ↔️ Stimulates demand and investment
• Inflation reduces the purchasing power of money.

  True
• Achieving price stability reduces uncertainty for businesses and consumers
• What is the primary goal of monetary policy in controlling inflation?

  Reduce demand-pull inflation
• Cost-push inflation occurs when production costs, such as wages or import prices, rise.


  True
• Arrange the following policies by their primary impact on inflation:

  1️⃣ Monetary Policy - Reduces demand-pull inflation

  2️⃣ Fiscal Policy - Can reduce demand-pull inflation

  3️⃣ Incomes Policy - Targets cost-push inflation

  4️⃣ Supply-Side Policies - Reduces cost-push inflation
• Full employment leads to increased economic output and productivity.


  True
• What is the primary goal of government economic policy?

  Manage the economy
• Macroeconomic objectives often require governments to balance competing priorities
• What is government economic policy aimed at influencing?

  The economy
• Full employment ensures that everyone willing and able to work can find a job.


  True
• Arrange the macroeconomic objectives in order of their usual priority for governments:

  1️⃣ Economic growth

  2️⃣ Full employment

  3️⃣ Price stability

  4️⃣ Balance of payments equilibrium

  5️⃣ Equitable income distribution
• How is economic growth typically measured?

  GDP growth
• Arrange the benefits of economic growth in order of their long-term impact:

  1️⃣ Higher standards of living

  2️⃣ Reduced poverty

  3️⃣ Increased job opportunities

  4️⃣ Increased government revenue
• What is demand-pull inflation caused by?

  Excess aggregate demand
• Cost-push inflation occurs when production costs increase.

  True
• Price stability refers to maintaining low and stable inflation
• Why is achieving price stability important for an economy?

  Promotes economic growth
• What is meant by full employment in economics?

  Nearly all willing find jobs
• Fiscal policy is used to stimulate demand and achieve full employment
• Match the macroeconomic objective with its description:

  Economic growth ↔️ Increase in productive capacity

  Full employment ↔️ Nearly all willing find jobs

  Price stability ↔️ Maintaining low inflation

  Balance of payments equilibrium ↔️ Sustainable imports and exports
• Economic growth is typically measured by the annual percentage change in GDP.


  True
• Match the strategy with its impact on economic growth:

  Investment in infrastructure ↔️ Enhances productive capacity

  Technological advancement ↔️ Drives innovation and productivity

  Education and training ↔️ Improves labor skills
• Achieving price stability reduces uncertainty for businesses and consumers.

  True
• Inflation can reduce consumer spending
• What is one consequence of achieving price stability?

  Reduced uncertainty
• What is the definition of full employment?

  Nearly all willing workers find jobs
• Expansionary fiscal policy stimulates demand and creates jobs
• Order the primary accounts of the balance of payments:

  1️⃣ Current Account

  2️⃣ Capital Account

  3️⃣ Financial Account
• BOP equilibrium is achieved when the sum of all accounts equals zero
• What does a Gini coefficient of 0 indicate?

  Perfect equality
• What are some benefits of economic growth?

  Higher living standards
• Demand-pull inflation occurs when aggregate demand exceeds supply
• What does monetary policy involve in controlling inflation?

  Adjusting interest rates
• Demand-pull inflation occurs when aggregate demand exceeds supply.


  True
• Match the type of inflation with its cause:

  Demand-pull inflation ↔️ Aggregate demand exceeds supply

  Cost-push inflation ↔️ Rising production costs