Exam code: 0455 & 0987
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Define macroeconomic aims of government.
The macroeconomic aims of government are the main long-term objectives such as economic growth, low unemployment, stable prices, balance of payments stability, redistribution of income, and environmental sustainability, which promote a healthy and sustainable economy.
What is a typical annual target economic growth rate for developed economies, and why is it considered desirable?
Many developed economies target an annual growth rate of 2-3%, which is considered sustainable and less likely to cause excessive demand-pull inflation. It is a sign of growth
A person is considered if they do not have a job and are actively seeking one.
A person is considered unemployed if they do not have a job and are actively seeking one.
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Define macroeconomic aims of government.
The macroeconomic aims of government are the main long-term objectives such as economic growth, low unemployment, stable prices, balance of payments stability, redistribution of income, and environmental sustainability, which promote a healthy and sustainable economy.
What is a typical annual target economic growth rate for developed economies, and why is it considered desirable?
Many developed economies target an annual growth rate of 2-3%, which is considered sustainable and less likely to cause excessive demand-pull inflation. It is a sign of growth
A person is considered if they do not have a job and are actively seeking one.
A person is considered unemployed if they do not have a job and are actively seeking one.
True or False?
Governments use the Consumer Price Index (CPI) to measure inflation.
True.
Most governments use the Consumer Price Index (CPI) to track the inflation rate.
Define current account surplus.
A current account surplus occurs when a country’s exports of goods and services are greater than its imports.
Governments can reduce by taxing the wealthy and providing payments to the poor.
Governments can reduce income inequality by taxing the wealthy and providing welfare payments to the poor.
What is environmental sustainability in an economic context?
Environmental sustainability means ensuring that economic growth and development do not deplete natural resources or cause long-term environmental damage.
Define full employment.
Full employment is when an economy is using its labour resources as efficiently as possible, with very low unemployment.
What are the two main causes of inflation?
The two main causes of inflation are demand-pull inflation and cost-push inflation.
If are greater than imports, a country has a current account .
If exports are greater than imports, a country has a current account surplus.
Why is perfect income equality not desirable in an economy?
Perfect income equality removes the incentive to work and study, which can reduce economic productivity and innovation.
Define sustainable economic growth.
Sustainable economic growth is an increase in the total output of goods and services at a rate that can be maintained without causing excessive inflation or depleting natural resources.
Unchecked industrial activity can cause , resource depletion, and .
Unchecked industrial activity can cause pollution, resource depletion, and climate change.
How does economic growth typically affect unemployment rates?
When real GDP increases, unemployment rates usually fall, showing an inverse relationship between economic growth and unemployment.
Define full employment.
Full employment is when most people who want a job have one.
What can happen if total demand grows faster than an economy’s ability to produce goods and services?
If total demand grows faster than the economy’s ability to produce, prices may rise, causing inflation.
Keeping prices stable might mean reducing , which can reduce employment.
Keeping prices stable might mean reducing total demand, which can reduce employment.
Why can achieving full employment sometimes lead to higher inflation?
Achieving full employment increases wages and total demand, which can push up prices and cause inflation.
True or False?
Governments can always achieve all macroeconomic objectives at the same time without any trade-offs.
False.
There are often trade-offs between macroeconomic objectives, meaning achieving one can worsen another.
Define environmental sustainability.
Environmental sustainability means meeting today’s needs without harming the ability of future generations to meet their needs.
Economic growth can lead to more and waste, making it harder to protect the .
Economic growth can lead to more pollution and waste, making it harder to protect the environment.
Explain the conflict between economic growth and environmental sustainability using India as an example.
India’s rapid economic growth has increased demand for energy, much of it from coal, which raises carbon emissions. This shows how growth can conflict with environmental sustainability.
What is balance of payments stability?
Balance of payments stability means a country’s imports and exports are fairly even over time.
How can full employment affect a country’s balance of payments?
Full employment raises incomes, leading to more spending on imports, which can make the balance of payments less stable if imports rise faster than exports.