Macroeconomic Aims of Government

• What is economic growth?

  Annual increase in level of national output
• What are the 5 macroeconomic aims governments wish to achieve?

  Economic growth, full employment or low unemployment, stable prices or low inflation, balance of payments stability and redistribution of income and wealth
• What is unemployment?

  Occurs when people are willing and able to work, and seek employment, but are unable to find work.
• Higher employment leads to higher GDP, increases living standard in economy and represents greater efficiency in use of economy's resources
• What is the formula to calculate unemployment?

  Number of employed people/Number in the labour force x 100
• What is inflation?

  Sustained rise in general price level in an economy
• Governments set a target inflation rate in order to control economic activity. It is typically measured by using a Consumer Price Index (CPI)
• What is balance of payments?

  A financial record of a country's transactions with the rest of the world for a given time period
• A large and persistent balance of payments deficit suggests that the country is uncompetitive in international markets. Thus, a deficit on balance of payments will have a negative impact on economic growth and standards of living
• What is redistribution of income?

  Refers to macroeconomic aim of achieving greater equality in the distribution of income in an economy
• Taxation is used to redistribute income to help the relative poor.